Are Property Taxes Included in Mortgage?
Are Property Taxes Included in Mortgage?
Yes—property taxes can be included in your mortgage if your lender requires an escrow account. However, in some cases, homeowners may choose to pay property taxes separately if their loan allows it. It depends on the loan type, lender policies, and homeowner preference.
When purchasing a home one frequently asks whether homeowner tax obligations are included within the monthly mortgage payment. The payment of property taxes depends on both your existing loan type and your chosen lender. In many property loans homeowners pay their yearly property taxes with their regular mortgage installments enabling timely tax payments. Some property owners select different methods for their house tax payments. Knowing this system will let you create effective financial plans to prevent cost surprises.
Property taxes form an essential part of homeownership responsibilities because they fund local services that include funding for schools and maintaining roads and operating emergency response teams. Many lenders require borrowers to make monthly escrow payments of property taxes since there are assessments made annually. The implications of this information matter to you and everyone seeking mortgage options. Let’s break it down.
How Property Taxes Work in a Mortgage Payment
When you take out a mortgage, your monthly payment is typically made up of four components, often referred to as PITI:
Principal – The amount that goes toward repaying your loan balance.
Interest – The cost of borrowing the money from your lender.
Taxes – Your property taxes, which go toward funding local government services.
Insurance – Homeowners insurance, which protects your home from damage and liabilities.
The taxes and insurance portion is often placed in an escrow account managed by your lender. Every month, a portion of your payment is set aside in this account, and when your property taxes or insurance premiums are due, the lender makes the payments on your behalf. This ensures you don’t miss deadlines or face penalties.
Why Do Lenders Include Property Taxes in Mortgage Payments?
Many lenders prefer to collect property taxes as part of your monthly mortgage payment for two main reasons:
Protecting Their Investment – Property taxes are a legal obligation, and if left unpaid, they can lead to liens against the home. Since the house is collateral for your mortgage, lenders want to ensure taxes are covered to avoid complications.
Convenience for Homeowners – By spreading property tax payments across the year, homeowners avoid paying a lump sum when tax bills are due. This makes budgeting more manageable.
If you have a government-backed loan, such as an FHA, VA, or USDA mortgage, an escrow account is typically required. However, if you have a conventional loan and at least 20% equity, you may have the option to waive escrow and handle tax payments yourself.
Can You Pay Property Taxes Yourself?
Some homeowners prefer to pay their property taxes directly rather than having them included in their mortgage. This is usually an option if you meet certain lender requirements, such as a low loan-to-value ratio (LTV) or a strong payment history.
Pros of Paying Property Taxes Separately:
Greater Control – You can manage payments yourself and avoid lender miscalculations.
Potential Savings – Some lenders charge escrow account fees.
More Investment Opportunities – Instead of letting funds sit in escrow, you can use them for other financial goals.
Cons of Paying Property Taxes Separately:
Larger Lump-Sum Payments – Instead of spreading costs throughout the year, you’ll need to pay taxes in one or two larger payments.
Risk of Late Fees – If you forget or miss a deadline, you could face penalties or even a tax lien on your home.
Potential for Higher Mortgage Rates – Some lenders offer better rates when escrow accounts are used.
If you’re unsure whether to keep an escrow account or pay taxes separately, speaking with a mortgage professional can help you decide what’s best for your situation.
How Property Tax Increases Affect Your Mortgage Payment
Since property taxes are reassessed annually, they can fluctuate based on market values, local tax policies, or home improvements. If your taxes go up and you have an escrow account, your lender will recalculate your monthly payment to cover the difference.
For example:
Your property tax bill was $3,000 last year, so your lender collected $250 per month for escrow.
If your taxes increase to $3,600 this year, your lender will now need to collect $300 per month.
This means your monthly mortgage payment could increase even if your loan terms remain the same. On the flip side, if taxes decrease, your payment may be adjusted downward.
What Happens to Your Property Taxes When Your Mortgage is Paid Off?
Once you’ve fully paid off your mortgage, your lender will no longer collect and manage tax payments for you. Instead, you’ll be responsible for paying property taxes directly to your local government.
Many homeowners set up reminders or create a personal escrow-style savings plan, where they set aside a portion of their income each month to cover taxes when they come due. Missing payments can lead to penalties, so planning ahead is key.
Need Help Navigating Your Mortgage and Property Taxes?
Understanding your mortgage and how property taxes fit into it can be overwhelming, but you don’t have to figure it out alone. Movement Mortgage RGV is here to help. Our team is committed to providing expert guidance tailored to your homeownership goals.
You need to partner with the top mortgage company which provides help for property acquisitions and loan refinancings. Your mortgage solution becomes easier to determine because lenders who value transparency and education provide proper solutions for what you need.
Final Thoughts
Does mortgaging include the payment responsibilities for property taxes? Your loan type together with your lender's approach will determine this matter. Property tax payments in mortgages become part of regular monthly installments through escrow systems which simplifies budget control and maintains timely tax disbursements. Qualified homebuyers have the option to pay their property taxes separately to gain better financial control.
Having a proper mortgage partner proves crucial for both novice homebuyers and people refinancing their properties. Movement Mortgage RGV dedicates itself to providing homeowners with both education and helping them make well-informed mortgage choices. Talk to us today to determine your mortgage options for selecting the best financial plan.
Need mortgage advice? Contact Movement Mortgage RGV today!
